Connor has $540,000 to invest in a 5-year annuity. Assuming the time value of money is 12%, what amount will Connor receive in cash each year?

Connor has $540,000 to invest in a 5-year annuity. Assuming the time value of money is 12%, what amount will Connor receive in cash each year?

Explanation

Net present value = Expected cash flow × PV factor
$540,000 = Expected cash flow × 3.604776
Expected cash flow = $540,000 ÷ 3.604776 = $149,801 (rounded)
PV factor from Appendix Table 2 (n = 5 and i = 12)

 

The Russell Company provides the following standard cost data per unit of product:
 

Direct material (3 gallons @ $3 per gallon)	$	9.00
Direct labor (2 hours @ $13 per hour)	$	26.00

 

During the period, the company produced and sold 23,000 units, incurring the following costs:
 

Direct material	72,000	gallons	@	$	2.90	per gallon
Direct labor	46,500	hours	@	$	12.75	per hour

 

The direct material usage variance was:
 

Explanation

Usage variance = (Actual quantity – Standard quantity) × Standard price

Usage variance = [72,000 gallons – (23,000 units × 3 gallons per unit)] × $3 per gallon

Usage variance = (72,000 gallons – 69,000 gallons) × $3 per hour = $9,000

Since the actual quantity is greater than the standard quantity, the variance is unfavorable.

Thanks